Correlation Between Sotherly Hotels and Pacific Gas

Can any of the company-specific risk be diversified away by investing in both Sotherly Hotels and Pacific Gas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sotherly Hotels and Pacific Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sotherly Hotels Series and Pacific Gas and, you can compare the effects of market volatilities on Sotherly Hotels and Pacific Gas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sotherly Hotels with a short position of Pacific Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotherly Hotels and Pacific Gas.

Diversification Opportunities for Sotherly Hotels and Pacific Gas

0.37

Correlation Coefficient

Sotherly Hotels  Pacific Gas

Weak diversification

The 3 months correlation between Sotherly and Pacific is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels Series and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and Sotherly Hotels is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sotherly Hotels Series are associated (or correlated) with Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and Pacific Gas go up and down completely randomly.

Pair Corralation between Sotherly Hotels and Pacific Gas

Assuming the 90 days horizon Sotherly Hotels Series is expected to generate 1.35 times more return on investment than Pacific Gas. However, Sotherly Hotels is 1.35 times more volatile than Pacific Gas and. It trades about -0.02 of its potential returns per unit of risk. Pacific Gas and is currently generating about -0.08 per unit of risk. If you would invest  1,811  in Sotherly Hotels Series on October 23, 2024 and sell it today you would lose (65.00) from holding Sotherly Hotels Series or give up 3.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sotherly Hotels Series  vs.  Pacific Gas and

Sotherly Hotels Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sotherly Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacific Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Gas and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sotherly Hotels and Pacific Gas

The main advantage of trading using opposite Sotherly Hotels and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotherly Hotels position performs unexpectedly, Pacific Gas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pacific Gas will offset losses from the drop in Pacific Gas' long position.

The idea behind Sotherly Hotels Series and Pacific Gas and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.